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Guide to loans for stagnant businesses

Has your business growth plateaued? There are financing options you can consider.

With the discourse centring on innovation and entrepreneurship, it can be easy to be lulled into a false sense of security that continued business growth is inevitable. However, businesses of all sizes can go through stages where profits level out, and you may need financing to kick your business back into gear. This is the guide to read if your business is in that stage.

When is a business considered “stagnant”?

This is essentially when business growth plateaus. This may be due to an ongoing reduction in profit, to revenue slipping at a time of year when it should be increasing, or it becoming necessary to cut back in areas, such as marketing, which the business has not had a problem covering in the past.

Not the stage your business is at? Explore other options:


High-growth businesses

Established businesses

Businesses in decline

Funding needs that are common for stagnant businesses

Stagnant businesses can be in any industry and can be of any size, making their funding needs varied:

  • Marketing. Due to decreased or plateaued profits, you may have cut back on your marketing budget. This is not the time to be cutting back, but it’s sometimes a necessity. You may be looking for funding to be able to pay for this and generate new revenue for the business.
  • Human resources. There are several reasons a business may become stagnant, but this position may lead to failings in human resources, which impact the customer. By investing in your staff for customer service or product development, or hiring additional staff to assist with growth, you may be able to help your business expand.
  • Product or service redesign. Some businesses have a successful product or service at first, but they fall into stagnation due to lack of development or innovation. By seeking finance to expand your product line, re-innovate it or even just do market research, you can assist your business.
  • Hire outside help. It can be difficult to diagnose business issues if you’re entrenched in the business’s practices, which can make hiring outside expertise a good investment. You may opt for organisational experts, designers for marketing or website help or a PR agency that can drum up some interest in your business.

What types of finance are available?

Loan typeLoan amountHow it worksWhat to consider
Line of credit$10,000–$1,000,000Repay only what you use of the credit line, plus fees and interest
  • Flexible and based on your funding needs
  • Generous loan terms (usually up to 25 years)
Term loan$1,000–$500,000Make regular repayments over a set term, calculated at a fixed or variable rate
  • You must know how much you need to borrow
  • May be difficult to top up your loan if needed
Business overdrafthundreds–$10,000Make the minimum monthly repayments of any balance that you use
  • Only pay for the funds you use
  • Conveniently attached to your business account
Invoice financing80% or more of the invoice amountPay fees to bring your outstanding invoices forward
  • Improve cash flow by bringing invoice payments forward
  • If you become reliant on timely invoice payments, you may need to keep using the finance

Useful guides for stagnant businesses

How to compare your business loan options

If you’re unsure what loan you should opt for, here’s how you can compare business loans:

  • Loan amount. You will have a general idea of how much your business needs to borrow, so make sure the lender offers this. Business lenders usually have minimum and maximum amounts available, and if you’re taking out a secured loan, it will depend on how much your security is worth.
  • Interest rates. Lenders will charge a fixed or variable rate, or a factor rate, which is calculated differently. Check what type of interest rate will be charged and how high it is to get an idea of how competitive the loan is. Remember, the comparison rate will show you a representation of the interest rate plus fees.
  • Fees. You can be charged a whole range of fees with business loans. These can include upfront fees such as establishment and application fees, or ongoing fees such as monthly or annual fees. Late fees and default fees will also apply.
  • Turnaround time. How soon do you need the funds? Online lenders can give you your money in 24–48 hours, but more traditional lenders may take longer. Be sure to check that the turnaround time meets your needs before you apply.
  • Flexibility. As your business is stagnant, you may need a more flexible loan than what is offered. For instance, can you borrow more funds easily if you need to? Are you able to repay the loan early without penalty, or make additional repayments? Verify the flexibility of the loan before you apply.

Frequently asked questions

How can I grow my business profits?

There is no easy answer to this as it depends on your business size, industry and the product/service you’re offering. You need to start by analyzing your business’s position and seeing what has changed, or not changed, to cause your profits to plateau. You can also enlist some outside help and expertise to diagnose your business problems and help your profits grow.

What type of loan should I opt for?

Again, there’s no one answer. Some loans offer more flexibility with the loan amount, for example business overdrafts and lines of credit let you borrow up to and including a credit limit, while term loans give you a lump sum that you need to repay. Decide what you need out of the finance and then pick the loan type that suits you best.

How can I check my business’s credit position?

You can order a copy of your credit file from a credit reporting bureau or check your business credit score by following the link on this page.

I have an asset but am unsure whether or not to use it as security. Which is better?

Either might be better for your business. If you have confidence in repaying the loan then offering security will give you more loan options, but it is a more complicated process and you will lose the asset if you fail to repay. Keep this point in mind and compare secured and unsecured loans to see the differences in cost, then you can make a more informed decision.

I’m not sure if I can afford a business loan. Should I still apply?

If you fail to repay a business loan it will affect your credit history and ability to borrow money in the future. Late fees and enforcement expenses may also put your business in the red. You need to carefully consider whether a business loan is right for your current position, and you can start by determining the repayments for the loan and see if it is manageable with your cash flow.

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